Rosneft Narrowing Gap to Exxon on Buyout Deal: Russia Overnight

The acquisition that would boost Rosneft’s output to about 4.5 million barrels a day has propelled Rosneft’s valuation to 8.1 times earnings, the most expensive level since March 2011, data compiled by Bloomberg show. Photographer: Alexander Zemlianichenko Jr./Bloomberg

Oct. 25 (Bloomberg) -- OAO Rosneft is trading at the
smallest discount in four months to the world’s most valuable
energy stocks as the Russian company’s planned takeover puts it
in line to become the biggest global crude producer.

State-controlled Rosneft’s 9.5 percent climb since its Oct.
22 agreement to buy BP Plc’s Russian joint venture TNK-BP, and
the MSCI World Energy Index’s 3.2 percent drop in the same
period, narrowed the Moscow-based producer’s discount to 30
percent from as wide as 42 percent on Aug. 31. The Bloomberg
Russia-US 14 Equity Index of the most-traded Russian companies
in the U.S. sank for a second day yesterday as crude oil capped
the longest stretch of declines since May.

The acquisition that would boost Rosneft’s output to about
4.5 million barrels a day has propelled Rosneft’s valuation to
8.1 times earnings, the most expensive level since March 2011,
data compiled by Bloomberg show. Companies on MSCI’s gauge of
developed-nation energy stocks, which includes Exxon Mobil
Corp., the world’s largest energy company by market value, and
Chevron Corp., trade at an average multiple of 11.5.

“Rosneft is a blue-chip stock,” Adam Mattessich, head of
international trading at Cantor Fitzgerald LP said by phone in
New York yesterday. “People with exposure to oil and gas, or to
Russia, are taking a closer look at it or have invested.”

Russian equity futures expiring in December on the dollar-denominated RTS Index fell 0.7 percent to 144,700 in New York.
The RTS Volatility Index, which measures expected swings in the
index futures, rose 4.4 percent to 27.09.

Russia ETF Drops

The Bloomberg Russia-US 14 Index retreated 1.5 percent to
95.35 while the Market Vectors Russia ETF, the largest exchange-traded fund of Russian shares, dropped for a second day, losing
0.5 percent to $28.27.

Rosneft gained 3.9 percent yesterday in Moscow to 234.54
rubles, or $7.49, while its global depositary receipts traded in
London advanced 4.6 percent to $7.50.

Russia’s biggest oil producer agreed this week to pay BP
$17.1 billion along with 12.8 percent of its shares to buy 50
percent of TNK-BP. Rosneft also agreed to acquire the other half
of the venture from its billionaire shareholders for $28 billion
in cash, according to a statement on Oct. 22.

The deal would bring Rosneft’s output to equal that of
Exxon Mobil. Under the terms of the deal, BP will become a
pivotal
Rosneft partner, with a nearly 20 percent stake in the Russian
company and two board seats.

Oil Slides

Standard & Poor’s revised the CreditWatch status on
Rosneft’s
BBB- rating to positive from negative yesterday, reflecting the
possibility of a one-level upgrade.

Exxon Mobil, which trades for 11.4 times earnings, fell 0.3
percent yesterday in New York to $89.88. San Ramon, California-based Chevron gained 0.3 percent to $109.71, and trades for 8.4
times earnings.

Oil, which together with natural gas accounted for half of
Russia’s budget revenue in 2011, lost 1.1 percent yesterday to
$85.73 a barrel on the New York Mercantile Exchange, the lowest
settlement price since July 10.

Brent oil for December settlement dropped 0.4 percent to
$107.85 a barrel on the London-based ICE Futures Europe
exchange. Urals crude, Russia’s chief export blend, declined for
a seventh day, the longest losing stretch since July 2009, and
fell 0.4 percent to $106.56 a barrel yesterday.

CTC Tumbles

CTC Media Inc., the Nasdaq-listed Russian media company,
slumped 4.1 percent to $8.87, the most since July 3, after Igor
Semenov, an analyst at Deutsche Bank AG in Moscow downgraded the
shares to hold from buy.

Futures contracts on the ruble expiring in December
weakened
0.1 percent to 31.53 per dollar.

The Standard & Poor’s 500 Index fell to the lowest level
since Sept. 5, slipping 0.3 percent to 1,408.75 as the U.S.
Federal Reserve said the world’s largest economy is still
growing modestly and unemployment remains elevated. The Fed said
it plans to continue its monthly purchases of $40 billion in
mortgage-backed securities in an effort to spur growth.

The RTS Index in Moscow dropped 0.3 percent to 1,457.96
while the 30-stock Micex Index also retreated 0.3 percent to
1,451.61, a one-week low.

The Micex has gained 3.5 percent in 2012 and trades for 5.7
times analysts’ earnings estimates for member companies. That
compares with a 0.7 percent gain for Brazil’s Bovespa index,
which is valued at 14.9 times estimated earnings, according to
data compiled by Bloomberg. The Shanghai Composite Index trades
at 10 times estimated profit, and the BSE India Sensitive Index
has a ratio of 14.9.